Infosys Q3 results: What you can expect from the IT major

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Infosys Q3 results: What you can expect from the IT major

In an interview to CNBC-TV18, Kawaljeet Saluja, associate director and head of research at Kotak Institutional Equities, speaks about his expectation from Infosys and gives his outlook going forward.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ News and Notices about Infosys See interviews with Infosys Management See what other Experts & Brokerages are saying about Infosys See previous Results of Infosys Infosys BSE | NSE 29/05/12 Are Mutual Funds betting on Infosys? Other Stocks in this news Tata Consultancy Services | Wipro | HCL Technologies | MindTree | Hexaware Technologies |

IT major Infosys will declare its results for the third quarter ending December 31, 2011, on January 12.

In an interview to CNBC-TV18, Kawaljeet Saluja, associate director and head of research at Kotak Institutional Equities, speaks about his expectation from Infosys and gives his outlook going forward.

Also read: Infosys Q3 net seen up 22% to Rs 2322 cr

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying videos.

Q: What is going to happen with the earnings performance and with the guidance?

A: We expect Rs 23 billion of earnings from Infosys. That equates to around Rs 40 of earnings per share (EPS) for the December quarter.

On revenue growth, we expect 3.4% quarter-on-quarter dollar revenues growth to USD 1.8 billion. The performance of the company is going to be closer to the lower end of the December quarter revenue growth guidance of 3.2% to 5.4%.

For FY12 the revenue growth guidance will be taken down from 19% at the upper end to 17.5%, whereas the lower end of the band at 17% will be retained.

On EPS, we expect the EPS guidance to be taken up from Rs 145 at the upper end of the band to Rs 150. That's our broad expectation on numbers.

Q: What the market going to be more focused on? Will it be happy at the beat on the rupee numbers or will it choose to be circumspect, if the annual dollar guidance brought down and the dollar revenue for this quarter comes in at the lower end of the band?

A: I guess the management had communicated somewhere in early December that performance will be at the lower end of the guidance. So, to that extent, the street has understood that demand environment was not as strong as envisaged by the management in its earlier guidance. So, the street should be fine with the performance, a 3.4% dollar revenue growth.

I think what matters is the guidance for the March quarter and important cues which will give some visibility about fiscal 2013. A 2-4% dollar revenue growth guidance for the March quarter and stable pricing and strong lateral hiring should keep the street happy for the time being.

Q: Do you expect a bullish commentary or a very circumspect commentary for next quarter and for next year, given the kind of environment that Infosys is moving in today?

A: I cannot remember the last time I heard bullish commentary from Infosys. So, rather than attaching too much importance to the commentary, what will matter for the street overall is actually what the management says about closure of IT budget.

Second is the pricing trend. If for the constant currency pricing trend for the December quarter is stable then that will give the street a lot of comfort. Third is that if the lateral hiring is strong, that will also give street comfort. So, some of the metrics along with some comments on likely closure of IT budgets will set the tone for calendar year 12 or FY2013.

Q: There have been some reports that Infosys is facing challenges in terms of retaining market share. Would you worry that core volume growth for them is still a bit of an uphill challenge compared to their peers?

A: If Infosys is growing ahead of the industry, atleast to that extent they are performing better than the overall market. If the question pertain to underperformance vis-à-vis the peers - Cognisant, TCS and some of the other IT players then there has been some loss of market share. That loss of market share had, in our view, got to do with certain execution issues which are cropped up over the last 12 months.

In our view, a lot of those issues are being resolved. The relative underperformance should stop, when compared to TCS. December quarter performance would be a good indicator of the same.